NITISH DEY : People very often confuse between the term economic growth and economic development. In economics, the two terms have the different meanings. Economic growth means the increase in the real output of the country in the particular span of time whereas economic development means the increase in the level of production in an economy along enrichment of living standards and the advancement of technology such as life expectancy rate, infant mortality rate, literacy rate and poverty rates. Generally, this living standard was measured by the Human Development Index (HDI) as stated by the UNDP (United Nations Development Programme).

Now, we need to inquire when both of these things occurred in an economy. Economic growth occurs several times such as discovery of new material or mineral deposits, increase in the number of the people in the workforce, improving the quality of workforce, increase in capital and machinery and improvement in technology in the economy. The Economic development occurs when there is a increase in the real income per head – GDP per capita, increase in the levels of literacy and education standards, improvement in the quality and availability of housing, improvement in the level of environmental standards, increase in life expectancy.



Economic development is quite different from the economic growth. Economic growth is a narrow term where it only measures the increase in the per capita income whereas economic development is wider term it measures the institutional and non-institutional changes of the economy. Economic development always ensures the economic growth of the country but the vice versa is not true. Let, us take the example of Saudi Arabia. These oil producing country have the per capita income is 49045.41 US dollars but the value of the human development index for Saudi Arabia is 0.853 and it’s rank is 40 among the 189 countries. Now, we shift our focus from Saudi Arabia to Israel. Israel’s per capita income is 33300 US dollars and the value of the human development index is 0.903 and it was ranked 22nd among 189 countries.

Saudi Arabia’s economy depends largely on one key export such as export of crude oil. Saudi Arabia face several problems such as the rural population of Saudi Arabia is mostly uneducated. As they are the largest exporter of the crude oil, the money is in the hands of very few people and the country has the greater income inequality among the people. Saudi Arabia faces massive unemployment problem in the economy. The artificially-inflated workforce prevails in this country. The activity of the female in Saudi Arabia is very much constrained such that Saudi Arabia ranks 135 out of 187 in the United Nation’s Gender Inequality Index. Though the per capita income of Saudi Arabia is as the rich countries of Europe, North America, East Asia and Oceania but Saudi Arabia have very low value of the human development index. Some of the key measures that people often define as ‘development’ such as education, employment, economy, manufacturing, human rights, political stability, quality of life are very much skewed in Saudi Arabia.


On the other hand, Israel have very high value of the human development index published by UNDP. Though this country is fighting a war with Palestine but they reached very high level of human development value due to the government’s policies. Israel is the 6th healthiest country in the world and most Israelies live in the apartments. Israel is the fourth most educated country in the world according to the 2014 OECD survey. Israel’s poverty line is higher than the other developed countries but the poverty level is lower. Israel has 42 designated highways and an advanced road network which spans over 17,870 kilometers. Israel is highly urbanized nation with 92 percent of population living in urban areas. Israel have a very life expectancy of birth and considered a high income country by the World Bank.

Economic development and economic growth are different terms. Economic growth is one of the indicators of the economic development. Economic development can be achieved without high economic growth but mere economic growth can not be the indicator of the economic development.


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